The Supreme Court on Monday struck down part of the anti-fraud law enacted in response to the Enron and other corporate scandals from the early 2000s, but said its decision has limited consequences.
The justices voted 5-4 that the Sarbanes-Oxley law enacted in 2002 violates the Constitution's separation of powers mandate. The court says the president, or other officials appointed by him, must be able to remove members of a board that was created to tighten oversight of internal corporate controls and outside auditors.
Congress created the board to replace the accounting industry's own regulators amid scandals at Enron Corp., WorldCom Inc., Tyco International Ltd. and other corporations. The board has power to compel documents and testimony from accounting firms, and the authority to discipline accountants.
Chief Justice John Roberts, writing for the court, said that the Sarbanes-Oxley law will remain in effect with one change. The Public Company Accounting Oversight Board will continue as before, but the Securities and Exchange Commission now will be able to remove board members at will.
That change, Roberts said, cures the constitutional problem.